BARBICAN LIFE ADVERTORIAL
TAX ADVICE FROM STONE KING You don’t have to survive 7 years for a gift to be free from inheritance tax.
R
od Smith of Accountants Stone King
demonstrates that there are perfectly legal ways of gifting more than £3,000 without it being subject to inheritance tax. Aside from gifts of the annual personal allowance of £3,000, minor
gifts and those to charities and spouses, the general rule is that for a gift to be discounted from a calculation of inheritance tax you need to survive 7 years from the date of the gift. However, there is a way of making substantial gifts which are immediately exempt from inheritance tax.
Normal expenditure out of income:
The criteria for this exemption are that the gifts must be:
1.Part of the normal expenditure of the person making the gift, ‘the donor’
Payments can be ‘normal’ despite being of differing amounts. To ensure that expenditure is regarded as normal, the donor should make a written declaration of intent to give away surplus income.
2.Made out of income (taking one year with another) The intention behind this criterion is to provide for fluctuations of the donor’s income from year to year but where overall they have enough income to make normal gifts and meet their standard of living on an ongoing basis. In these cases you need to look at income and expenditure over a number of years to ensure that the income test is satisfied.
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Your Local Solicitors
Stone King offers expert legal advice for you on:
Wills&saving tax Powers of Attorney Probate&trusts Buying and selling property Care funding Family law and mediation
Please call or email Rod Smith on 0207 324 1534,
rodsmith@stoneking.co.uk.
We offer an initial review at our offices without charge. 16 St John’s Lane London EC1M 4BS
www.stoneking.co.uk Rod Smith, Partner
3.Leave the donor with sufficient income to maintain his or her usual standard of living.
This is evidenced by accurate record keeping for each tax year. These records will form the basis of the claim by the donor’s personal representatives, assuming that the gifts were made in the 7 years before the date of death.
The exemption in practice: Gifts of differing amounts can be made at irregular intervals directly to beneficiaries or into trust/to a third party for their benefit. This provides enormous scope for flexibility and significant savings in the long term. It is also low impact financially since, by definition, the source of the gift is surplus income.
If a couple, on average, made annual gifts of £10,000 over 20 years, the immediate inheritance tax saving will be £80,000. This is on top of the annual personal allowances and other minor gifts.
I’d like to know more about saving tax; what do I do now?
Please call or email me on 020 7324 1534,
rodsmith@stoneking.co.uk, to arrange a meeting.
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